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There's a new form of credit card fraud going around. Someone calls, gives his name and badge number and says he's with the security and fraud department at Visa.

"Your card has been flagged for an unusual purchase pattern and I'm calling to verify," he says.

"This would be on your Visa card, which was issued by (name of bank). Did you purchase an anti-telemarketing device for $497.99 from a marketing company based in Arizona?"

You say no. Good news: You will get a credit in your Visa account.

"This is a company that we have been watching and the charges range from $297 to $497, just under the $500 purchase pattern that flags most cards," the caller continues.

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"I will be starting a fraud investigation. If you have any questions, you can call the 1-800 number on the back of your Visa card and ask for security."

Now comes the tip-off, the important clue that should alert you to the fraud.

The caller asks you to look for seven numbers on the back of your card. He reads you the first four, which are part of your card number, and asks for the last three – the security numbers that verify you are the possessor of the card.

When you give the security numbers, he says, "That is correct. I just needed to verify the card has not been lost or stolen and you still have it."

The scam is effective because you say very little. The caller already has your credit card number, your address and the issuer's name and gives you all the information – except for the one piece he wants.

"It is entirely plausible. Even someone very familiar with banking could easily fall for this one," says Doug Melville, senior deputy ombudsman for banking services at the Ombudsman for Banking Services and Investments.

The three-digit number, known as the card verification value or CVV, on the back of your Visa card ensures the actual card is present for the transaction. Melville says.

"A `skimmed' or `cloned' counterfeit credit card would not have that information. The fraudsters clearly know this. They already have your other credit card information, they only need the CVV to go shopping online."

An Alberta victim called her Visa issuer within 20 minutes of giving out her three-digit number. She was told a new purchase of $497.99 had been charged to her card.

"What makes this more remarkable," she says, "is that I got a call from `MasterCard' a few days later, with a word-for-word repeat of the Visa scam. This time, I didn't let him finish. I hung up."

Only someone who understands the inner workings of credit card charges could have designed such a pitch.

"The fact that the transaction they put through is the same as the `questionable' one they raise over the phone just shows the elegance and boldness of this fraud," Melville says.

You won't be surprised to see the charge on your monthly statement, thinking the bank will reverse it. By the time you notice there's no credit, you may be too late to do anything.

Visa and MasterCard both have a zero liability policy for fraudulent transactions. However, card issuers often impose time limits of 60 to 90 days for chargebacks.

"The single most important way to avoid credit card fraud is to check your statements religiously every month," says David Agnew, the ombudsman at the Ombudsman for Banking Services and Investments.

And never give out information to people who call to verify a purchase, even if they sound official.

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